Evidence is clear that a lawsuit challenging a merger before Delaware courts is currently less likely to be successful than just five years ago – which does not mean that there is a decline tout court of the corporate litigation. Indeed, in a rather short time, the legal framework has substantially changed, shifting to a less favourable position for the actual protagonist of such monitoring device: the plaintiff’s attorney filing the case. As a response to an unreasonable increase in deal litigation, the principles stated in Corwin and in M&F Worldwide did extend the shield of the business judgment rule, under some conditions; and made the prosecution of merger litigation far more difficult before Delaware judges. In addition, with Trulia, Delaware Chancery Court changed its standard on settlement countenance, proclaiming it would have no longer validated disclosure-only settlements, without a careful scrutiny on actual shareholders’ benefits. But whilst the result of a decrease, if not the complete eradication, of frivolous litigation is obviously desirable, some doubts have arisen about the actual outcome of this combination of new rules; and about the collateral effect of this shift not only in terms of the efficiency (if ever) of the classical mechanism of private enforcement but also in terms of corporate governance and, ultimately, of Delaware’s role in American corporate law. For some of these unwelcome effects, Delaware legislation has even been amended, enacting a provision unequivocally authorising forum selection bylaws – which companies have then massively adopted. However, litigation dynamics have proved to be highly adaptive; and more than a strategy has been conceived to circumvent the rule. But the extent and the consequence could be surprising; and some wounds appear to be someway self-inflicted. Thus, the issue seems to be going well beyond the traditional Delaware’s dilemma in maintaining a balance between efficient management and shareholders’ protection.
IT IS WINTER IN DELAWARE FOR MERGER LITIGATION. AND IT MIGHT BE AUTUMN FOR DELAWARE'S DOMINANCE
MATERA P
2018-01-01
Abstract
Evidence is clear that a lawsuit challenging a merger before Delaware courts is currently less likely to be successful than just five years ago – which does not mean that there is a decline tout court of the corporate litigation. Indeed, in a rather short time, the legal framework has substantially changed, shifting to a less favourable position for the actual protagonist of such monitoring device: the plaintiff’s attorney filing the case. As a response to an unreasonable increase in deal litigation, the principles stated in Corwin and in M&F Worldwide did extend the shield of the business judgment rule, under some conditions; and made the prosecution of merger litigation far more difficult before Delaware judges. In addition, with Trulia, Delaware Chancery Court changed its standard on settlement countenance, proclaiming it would have no longer validated disclosure-only settlements, without a careful scrutiny on actual shareholders’ benefits. But whilst the result of a decrease, if not the complete eradication, of frivolous litigation is obviously desirable, some doubts have arisen about the actual outcome of this combination of new rules; and about the collateral effect of this shift not only in terms of the efficiency (if ever) of the classical mechanism of private enforcement but also in terms of corporate governance and, ultimately, of Delaware’s role in American corporate law. For some of these unwelcome effects, Delaware legislation has even been amended, enacting a provision unequivocally authorising forum selection bylaws – which companies have then massively adopted. However, litigation dynamics have proved to be highly adaptive; and more than a strategy has been conceived to circumvent the rule. But the extent and the consequence could be surprising; and some wounds appear to be someway self-inflicted. Thus, the issue seems to be going well beyond the traditional Delaware’s dilemma in maintaining a balance between efficient management and shareholders’ protection.I documenti in IRIS sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.
